From: Marsha Fox [mailto:mfox@spectral.com] 

Sent: Thursday, February 03, 2011 9:24 AM 

To: EBSA, E-ORI - EBSA 

Subject: Definition of Fiduciary Proposed Rule 

February 3, 2011 

Mr. Fred J. Wong 

Employee Benefits Security Administration 

U.S. Department of Labor 

Office of Regulations and Interpretations Room N-5655 

200 Constitution Avenue, NW 

Washington, DC 20210 

SUBJECT: Comments on the DOL Proposed Regulation – Definition of the Term 

"Fiduciary" (Federal Register, Volume 75, Number 204, Pages 65263-6578, October 22, 

2010, Proposed Regulation) 

Dear Mr. Wong: 

The ESOP Association has brought to my attention that the above regulation is about to 

be acted upon. As an ESOP Trustee of our company, I believe that this new ruling 

requiring evaluators to be ESOP trustees will result in significant harm to ESOP 

participants, ESOP companies, and society. 

1. As one of the ESOP trustees, we are fiduciaries that are currently responsible for 

determining the fair market value. Existing case law and current regulations 

provide remedies for when the ESOP trustee is using an incorrect valuation and 

when appraisers are acting with discretion over plan assets. Remedies also exist 

for parties that are not satisfying their legal, fiduciary, and contractual 

responsibilities. 

2. The cost to perform an ESOP appraisal would significantly increase. Firms 

performing ESOP appraisals would need to obtain additional and more expensive 

insurance, hire counsel, and take additional steps to comply with the regulations 

and manage the additional risk of litigation. These additional costs will be passed 

through to the ESOP companies and negatively impact the accounts of ESOP 

participants. 

3. The previously-mentioned additional cost and risk associated with performing 

ESOP appraisals would cause some to leave the industry. This would reduce the 

number and quality of available appraisers, which would further increase the cost 

of performing an appraisal and decrease the quality. These additional costs will 

also be passed through to the ESOP companies and negatively impact the 

accounts of ESOP participants. 
4. The Internal Revenue Code requires that an appraiser be independent. The 

fiduciary responsibility to the plan participants would violate that independence. 

5. The previously-mentioned lack of independence would likely cause a selling 

shareholder to hire a second valuation firm, further increasing the cost of 

implementing and maintaining an ESOP, and further negatively impacting the 

accounts of ESOP participants. 

6. The fiduciary responsibilities of the trustee and appraiser would be unclear and 

would create confusion problems in determining who is responsible for what and 

how each party is supposed to satisfy their fiduciary obligations. 

7. The increased costs to establish and maintain an ESOP would significantly reduce 

the number of new ESOPs and cause existing ESOP companies to terminate their 

ESOP. This would negatively impact ESOP participants, ESOP companies, and 

society. A study, summarized years of research on the effects of ESOPs and 

employee ownership. The study found that ESOP participants benefit by 

increased employee wealth and wages, greater employment stability, and 

increased job satisfaction. It found that ESOP companies experienced an increase 

in productivity, profitability, and likelihood of firm survival. It also found that 

ESOPs benefit society by providing economic growth with increased sales and 

employment growth. 

8. The DOL proposed regulations do not address the root causes of the problems you 

have identified. These problems include a lack of clear, concise and current 

valuation regulations and a lack of professional competence standards, 

qualifications, and/or credentials to perform an ESOP appraisal. 

I encourage you to modify the DOL proposed regulations to remove the requirement that 

persons providing ESOP appraisals and fairness opinions are fiduciaries. If you do not 

find that current regulations provide sufficient remedies, working with the ESOP 

professional community to create professional standards and enforcement procedures and 

providing the community with clear guidance are two solutions that would effectively 

address your concerns. 

Sincerely, 

Marsha J Fox, PhD 

Vice President of Operations 

Spectral Sciences, Inc. 

4 Fourth Ave 

Burlington, MA 01803 

Phone: 781.273.4770 

www.spectral.com